European Commission welcomes Parliament's support for an optional Europe-wide contract law

Strasbourg, 8 June 2011 - The European Parliament, in a vote of its 736 members plenary today, with an overwhelming majority (521 in favour, 145 against, 8 abstentions) backed optional EU-wide rules for businesses and consumers who are concluding contracts in the Single Market. The vote by Parliament follows a recent policy announcement by European Commission Vice-President Viviane Reding that she is considering proposing such an optional European contract law in the autumn (SPEECH/11/411). Her objective is to bring more coherence to contract law in Europe while easing cross-border transactions, notably for Europe's small businesses and its 500 million consumers.

"I welcome today's vote by the European Parliament to back an optional European contract law," said Vice-President Reding, the EU's Justice Commissioner. "I am looking closely at all the possibilities to ease cross-border transactions, and I believe the option favoured by the European Parliament could be a very good choice. It would give Europe's 500 million consumers more opportunities to shop across borders while cutting transaction costs for small businesses – the backbone of our economy. I will work closely with the European Parliament and all Member States to see how to turn today's vote into an attractive legal reality."

Transaction costs (like adapting contractual terms and commercial policies or obtaining translation of the rules) and legal uncertainty involved in dealing with foreign contract laws make it particularly hard for small and medium-sized enterprises, which make up 99% of all enterprises in the EU, to expand within the Single Market. An optional European contract law could be chosen freely by consumers and businesses in their contractual relations as an alternative to the existing national contract laws when they want to buy or sell goods across a national border. It could save a small online business wishing to trade in Europe an estimated €9,000 in legal and translation fees per market – or over €230,000 if they wanted to take their business EU-wide.

Today’s political endorsement of the idea of an optional European Contract Law follows a vote in April by the Legal Affairs Committee on an own-initiative report by Diana Wallis (MEMO/11/236).

Background

Contracts are essential for running businesses and making sales to consumers. They formalise an agreement between parties and can cover a broad range of matters, including the sale of goods and associated services such as repairs and maintenance.

Companies use a wide variety of contracts that are governed by different national contract laws when operating in Europe’s Single Market. The 27 different sets of national rules can lead to additional transaction costs, increased legal uncertainty for businesses and lack of consumer confidence. These can act as a deterrent for both consumers and businesses to shopping and trading across EU borders. Small and medium-sized companies are particularly affected by higher transaction costs.

Under the Europe 2020 strategy (IP/10/225), the Commission is tackling bottlenecks in the Single Market to drive economic recovery. This includes working on harmonised solutions for consumer contracts, EU model contract clauses and making progress towards a European contract law.

In July 2010, the Commission put forward several options in a Green Paper for a more coherent approach to contract law. The Commission then held a public consultation that ran until 31 January 2011 and resulted in 320 responses (MEMO/11/55).

On 12 April 2011, the European Parliament's Legal Affairs Committee approved an own-initiative report by Diana Wallis which backs an optional European contract law (MEMO/11/236) and was the basis for the vote in plenary. Parliamentarians have now backed the committee's view that an optional instrument could be complemented with a reference 'toolbox' to ensure the coherence and quality of legislation on European contract law.

On 3 May 2011, an expert group established by the Commission delivered a feasibility study on a future initiative on European contract law (IP/11/523). This study is currently being analysed by the Commission as to whether and how it can serve as a starting point for a political follow-up initiative on European contract law.